BlackBerry's Shares Boost in Arbitration Case Against Qualcomm

For the first time in over a year, BlackBerry (NASDAQ:BBRY; TSX:BB) shares reached their highest levels following interim arbitration decision awarding the company $815 million in royalty overpayments made to Qualcomm (NASDAQ:QCOM).
On Wednesday (April 12), shares of BlackBerry climbed 15.19 percent on the NASDAQ to reach $8.85, while its shares soared 14.90 percent on the Toronto Stock Exchange to $11.80.
According to BlackBerry’s press release, the two companies entered into an agreement on April 20, 2016 to arbitrate a distribute regarding Qualcomm’s agreement to cap specific royalties about payments made by BlackBerry.

Following the decision, John Chen, CEO of BlackBerry, said that the two companies have a “longstanding relationship” and will continue working together as technology partners.
“We are pleased the arbitration panel ruled in our favor and look forward to collaborating with Qualcomm in security for ASICs and solutions for the automotive industry,” Chen said in the release.
While BlackBerry company executives and its shareholders are no doubt pleased with the decision, Qualcomm doesn’t share the same enthusiasm.
In an announcement released by Qualcomm, the company stated that while it doesn’t agree with the decision, it isn’t binding or appealable.
“The arbitration decision was limited to prepayment provisions unique to BlackBerry’s license agreement with Qualcomm and has no impact on agreements with any other licensee,” the release said.
Still–the arbitration puts BlackBerry in a good position, who is now transitioning into a software company. According to MarketWatch, Canacoord Genuity analyst Matthew Walker said the decision means that BlackBerry will receive the full arbitration amount–totalling approximately 20 percent of its current market cap.
“With BlackBerry planning to invest for growth in its software businesses, the surprising arbitration award and $815M in cash from Qualcomm will bolster BlackBerry’s balance sheet and increase the likelihood of acquisitions to augment growth,” Walker he said in a note.
MarketWatch further noted that TD Securities made similar comments regarding BlackBerry’s win, who may potentially focus on the Internet of Things.
“We believe any acquisitions to build out BlackBerry’s IoT sales channel would be attractive,” analyst Daniel Chan said in a note. “Moreover, the cash could be used to continue to build out the company’s own sales team.”
While BlackBerry’s shares climbed on Wednesday, Qualcomm’s dipped 2.96 percent to $53.66 as of 12:23 p.m. EST.
Don’t forget to follow us @INN_Technology for real-time news updates.
Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.